LONDON • The British pound yesterday fell the most in a week as political developments in the United Kingdom cast a shadow on Prime Minister Theresa May's ability to push for the Brexit deal she wants.

The pound snapped a two-day rally after the Sunday Times reported that 40 Conservative members of Parliament, nearly enough to trigger a leadership challenge, have agreed to sign a letter of no confidence in her.

This prompted a response by the opposition Labour, which accused Mrs May of lacking the support from her own party to deliver the Brexit transition period she has proposed.

The sterling fell as much as 0.8 per cent to US$1.3092 as leveraged accounts aggressively sold the currency, according to traders in London.

The newspaper report came amid concerns over the amount Britain needs to pay for its divorce from the European Union, which according to European Parliament President Antonio Tajani should be "at least €60 billion (S$95 billion)".

The pound rose last Friday after European Commission chief Brexit negotiator Michel Barnier and UK Brexit Secretary David Davis left open the chance of a transition deal by the EU's summit on Dec 14.

The relief rally has now reversed as news over the weekend suggests big hurdles remain in place.

Option traders have also applied pressure on the pound, as bets on a weaker sterling by year-end gained traction on Monday, risk reversals show.

BLOOMBERG